Consider it a warning: Your kids are always watching you. Their young minds absorb everything around them and they will often copy your behaviors. So, it’s never too early to show them and teach them proper money management skills.
By age three kids begin to grasp basic spending and saving concepts ,and by age seven they have formed habits. The most effective and easiest way to teach them is with everyday life lessons.
Here, a few things every parent can do:
1. Teach them to appreciate work and brainstorm fun ways to earn money
The first thing children should learn at a young age is where money comes from. Giving them simple chores or ways to earn their first few dollars will teach them the importance of working hard to earn money. They will understand money doesn’t grow on trees or just come for free somehow.
Encourage them to think about what they love and and how they can use their talents to create a small business. For instance, if your child loves to bake then you might encourage a bake sale, or if they love dogs maybe they can be a neighborhood dog walker. Help them create a business plan and research how much to charge.
2. Keep a record of what they make
Allowance can be a big life lesson for a kid, as they’ll begin to see the value of managing funds. Designate a folder, piggy bank or notebook where they can track their earnings and all their purchases. This will teach them fundamentals for analyzing bank statements and creating monthly budgets in the future.
3. Encourage them to save
The next time your child expresses interest in a toy or gadget, allow them to save up for it and purchase it themselves. Develop a step-by-step plan with them and instill confidence that they can earn that toy within a certain time-frame. This process of saving money with the specific goal in mind will reinforce the gratification that comes from purchasing it without any help from mom and dad.
4. Teach them the value of the dollar
When it comes to teaching your kids the value of a dollar, one of the best ways is to give them actual dollars. Using cash with your kids will teach them money is finite. When you are shopping, use cash yourself, let them communicate and hand the cash to the cashier and they will learn to understand things cost money. When things are on sale, show them the sale price, original price and help them understand how much you are saving.
5. Teach them the value of investing
If you’ve got older kids and teens, start teaching them the importance of investing. You can even give them the gift of stock with Stash. Stash is a great place to start investing because you can invest in fractional shares for any amount you can afford. They have an excellent platform for kids and teens that allows them to track their stocks 24/7 and place trades that you approve. They can also share a wish list of favorite stocks with family and friends.
Lead by example and be open and honest about money and spending habits with your kids from the time they are toddlers. These are important skills they won’t learn in school and are solidified by experience and practice. Do this and you’ll set them up for financial success in the future!
Feature Illustration: Laura Caseley For The Money Manual